BMW profit hit by antitrust case, spending on technology

BMW lost money making cars in the first quarter as its automotive division was hit by a €1.4-billion (US$1.6-billion) set-aside for an antitrust fine from the European Commission and by higher upfront costs for new technology and factories.

The fine and investment spending, along with weaker pricing in some markets, led to an operating loss for the company’s carmaking business of €310 million, while its financial services and motorcycle businesses remained profitable and pushed the company as a whole into profit.

The loss reported Tuesday compares with an operating profit of €1.8 billion for the division in the year-earlier quarter.

Net profit for the entire firm fell to €588 million from €2.28 billion a year earlier. Revenue fell 0.9 per cent to €22.46 billion.

The European Commission is investigating automakers on suspicion they colluded to restrict competition in the development of emissions-reduction technology. BMW disputes the allegations and says it will challenge them legally, but concedes a fine is more likely than not.

The Munich-based company was able to slightly increase the number of vehicles sold to 605,333 and said it expected a boost from new models. Those include improved hybrid versions of its mainstay sedans, the 3-Series and the larger 7-Series, as well as of the X5 sport-utility, which have extended their electric-only range before using the internal combustion engine.

CEO Harald Krueger said the company remained positioned for better results due to new products and leaner structures. “We remain firmly on course and expect business to benefit from tailwinds, especially in the second half of the year, as new models become available,” he said in a statement.

INCREASED EXPENSES

The company saw increased expenses for research and development totalling €1.4 billion, and spending on plants, property and equipment of €1 billion. The increases came from introducing new, flexible plant structures and building a new plant in Mexico.

BMW said it had seen pressure on pricing in some markets. A key metric, operating profit margin on its automobile business, declined to minus 1.6 per cent from plus 9.7 per cent in the same quarter a year ago. Without the antitrust penalty, it would have been plus 5.6 per cent.

The diminished profitability was in sharp contrast to the fat margins BMW used to rack up quarter after quarter, and reflects the cost and regulatory pressure faced by the global car industry.

AP